1.Challenges faced by technology business for financing
Tech organizations are bigger and more varied as compared to the others. This rapidly growing and expansive field attracts the investors and venture capitalists. However, I found that the technology companies face various unique challenges that the start-ups of other companies may not have to face. Major challenges faced by the tech companies are as follows –
Continuous change – continuous changes in the technology as compared to other industries lead to the start-up issues. Lot of pressures are there for quick move and beating the competitor for finding a solution. Owing to these factors, investors think twice before investing in tech companies.
Partnership decisions – as the new business partnership with any other company from the same field may sound great. However, as the stakes are comparatively higher for the start-up of tech companies the operations can be ruined easily if the mainstream technologies become obsolete. Therefore, as the chances of financial losses are higher, most of the investors do not find the tech companies as profitable investment option.
2.Available funding options for technology start-ups
I found that sometimes the tech start-ups find it difficult for using the start-up loan or bank loan as the funding option. It may take long time for a platform or app for becoming profitable. For instance, Twitter, one of the widely used social network still making loss in each year. Some funding options for tech companies are as follows –
Bootstrapping – this is a funding option that will use my own resources for generating a product that is minimum viable and releasing that in the market as early as possible and thereafter, feedback from the audience will be taken for improving and refining the product (Jonsson and Lindbergh 2013). Instead of investing too much money and time for creation of a product that I feel is perfect, it will be a wise decision to create a product as per the requirement of the potential customer. The main advantage of this funding is I will be able to work more efficiently for the final product and gain customers those may assist in generating profit in initial stages (Albert et al. 2014).
Crowd funding – this type of funding is divided into reward-based crowd funding and equity crowd funding. Under equity option, the investors will invest their money for my business and will get equity as return (Mollick 2014). On the other hand, under reward-based option, people invest their money in my business and will receive reward in return. The main advantage of this form of funding is that with the reward-based option, I will have full control and under the equity-based option I can offer the investor exactly the same that I will feel comfortable with. It will also assist me in showcasing the fact that there is an active market for my proposal (Sahm et al. 2014). However, the crowd funding is considerably time consuming and requires big commitment for success
Albert, M., Bartlett, J., Johnston, R.N., Schacter, B. and Watson, P., 2014. Biobank bootstrapping: is biobank sustainability possible through cost recovery?. Biopreservation and biobanking, 12(6), pp.374-380.
Jonsson, S. and Lindbergh, J., 2013. The development of social capital and financing of entrepreneurial firms: From financial bootstrapping to bank funding. Entrepreneurship Theory and Practice, 37(4), pp.661-686.
Mollick, E., 2014. The dynamics of crowdfunding: An exploratory study. Journal of business venturing, 29(1), pp.1-16.
Sahm, M., Belleflamme, P., Lambert, T. and Schwienbacher, A., 2014. Corrigendum to “Crowdfunding: Tapping the right crowd”. Journal of Business Venturing, 29(5), pp.610-611.